Sources: Cylance Hit By Layoffs, Company Says Cuts Are Part Of Overall Realignment

Cylance, one of the strongest recent success stories in the security market, has been hit by a round of layoffs, multiple sources close to the company told CRN.

Sources said the majority of layoffs hit the Irvine, Calif.-based company's sales and marketing departments.

Cylance confirmed the cuts to CRN.

[Related: 2017 Security 100: 20 Coolest Endpoint Security Vendors]

"Cylance has experienced unprecedented growth and each fiscal year we have realigned our resources to support our strategic direction. These changes are a normal part of balancing business needs and company capabilities that carry out each year. Our focus remains on our customers and removing legacy anti-virus and weak protection layers to protect the world from cyberattack. Cylance is on pace to more than double revenues year over year in FY17," the company said in an emailed statement to CRN.

Senior Vice President of Marketing Shaun Walsh told CRN the cuts were a "small adjustment" but would not comment on an exact number as Cylance is a private company. Cylance confirmed that, as of yesterday, the company had approximately 800 active employees. Walsh said the cuts are in response to "explosive growth" at Cylance and that the company has restructured to align its skill sets for future success in particular geographies and new product lines.

The Register also reported layoffs at Cylance Wednesday, citing an anonymous tip. The Register said layoffs were up to 20 percent of the company's workforce, a number sources also told CRN. Cylance's Walsh said that number is a "significant exaggeration" of the cuts.

Walsh said there were a "few individuals" affected in the company's channel organization but said partners "are not going to see a material difference in our channel."

"We are a partner company," Walsh said. "We are not changing our go-to-market model. We are a channel partner company. That is how we do our business."

Cylance was the fastest-growing private cybersecurity company in 2015, according to the 2016 Inc. 5000, with $11.1 million in revenue in 2015 and a 7,613 percent three-year growth rate. The company has also landed a huge amount of venture capital funding, including $100 million in Series D funding in June, one of the largest by any security company last year.

Sources told CRN last month that the company has struggled to meet its sales expectations. Cylance is a private company, so it does not have to disclose its sales and earnings numbers publicly.

Cylance partners said they weren't concerned about the company's outlook or the layoffs, with multiple partners saying their business through the company is still booming. One partner executive attributed layoffs to "unrealistic expectations" of growth for any startup company, rather than a lack of demand for its technology.

"They're still the fastest-growing company and are dwarfing other endpoint security vendors. You can only grow so fast. … It's all just about expectations. They're killing it," the partner executive said.

Justin Kallhoff, CEO of Infogressive, a Lincoln, Neb.-based Cylance partner, said Cylance has been driving a huge part of Infogressive's more than 300 percent year-over-year revenue growth. He said he hadn't heard about missed sales expectations, but said it is likely due to higher-than-achievable expectations, rather than a lack of growth based on what he's seeing with customers.

"We're crushing it," Kallhoff said. "I'm not worried about them at all."

That growth comes as the market for endpoint security heats up, with increasing customer demand for endpoint security solutions and a new wave of startup entrants and legacy vendors updating their security portfolios. According to research firm MarketsandMarkets, the endpoint security market is expected to reach more than $17.3 billion by 2020, up from $11.6 billion in 2015.

However, as that market opportunity expands and more vendors look to capitalize on it, Cylance has received a lot of heat for its offering, with companies such as Sophos going after the company's testing claims and Symantec saying it does not provide a full endpoint security offering. Cylance has fired back at the companies, urging customers to test the offering for themselves and hiring away some top channel executives from some of its competitors.

Cylance has also faced increased competition as its competitors move into its stronghold in the next-generation anti-virus space, with companies like Carbon Black acquiring Confer to get into that market and others, such as Crowdstrike, Symantec, FireEye and more, also looking to expand there. However, Cylance itself is also looking to expand, with expectations that it will look to add EDR capabilities as well as expand into the consumer market.